Major US banks passed a stress test with flying colors, taking into account extreme economic scenarios. “The test apparently didn’t cause too much stress, which is good news,” says economist Edin Mujagic.
Major US banks routinely simulate the worst possible economic situations. In this case, property prices would fall 40 percent, unemployment would rise to 10 percent, and interest rates would fall to zero, Mujagic knows, wondering how that would affect major US banks. “The bottom line is that it wouldn’t be nice, but they all stay standing. And that’s good news.’
To trust
According to Mujagic, the positive result gives a lot of confidence that the banking system is in a much better and more stable state than in 2008. He emphasizes that a test result can never guarantee real-world results. “You’re not sure how things will go when something happens.”
Another important side note is that only the big US banks have performed the stress test, while noises in smaller regional banks have recently caused turmoil in the US banking system. Ultimately, three mid-sized banks failed, including Silicon Valley Bank. “There’s a good chance a lot of things are going wrong there, but the big banks are still much better off than they were in 2008. And that’s good news, after all.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
